Brazil will work with US to counter China: official

Bloomberg

Brazilian President Dilma Rousseff will discuss ways to counteract the threat posed by cheap imports from China with US President Barack Obama, a Brazilian official said.

China’s policy of undervaluing the yuan will be discussed when Obama travels to Brazil next month for his first meeting with Rousseff since she took office on Jan. 1, said the official, who is not authorized to speak publicly on the matter.

Rousseff, who travels to China in April, created a task force comprised of trade officials, diplomats, businessmen and outside experts to suggest policies to cope with rising Chinese imports. Among the options is a multilateral agreement between China and Latin American nations to boost manufacturing exports to the world’s second-largest economy, the official said.

Chinese exports to Brazil rose 61 percent last year to US$25.6 billion as a 34 percent rally by the real against the yuan since the start of 2009 lowered the cost of imports. The US trade deficit with China soared 21 percent to US$252 billion in the January-November period last year.

China overtook the US as Brazil’s biggest trading partner in 2009, as demand for the South American country’s iron ore and soybeans surged.

China has also been increasing its investments in Latin America’s largest economy. Sinopec Group (中國石化), China’s second-largest energy company, agreed last year to pay US$7.1 billion for a 40 percent stake in Madrid-based Repsol YPF SA’s Brazil unit. In 2009, China’s development bank agreed to loan state-controlled Petroleo Brasileiro SA US$10 billion, and signed a long-term supply contract with the oil company.

US Treasury Secretary Timothy Geithner will discuss bilateral and G20 issues with senior Brazilian officials on Monday in his first visit to Brazil since taking office in 2009, the US Treasury Department said on Tuesday.

Global trade rules under the auspices of the WTO are powerless for dealing with the competitive edge provided by China’s currency policy, the official said. Brazil’s decision last year to raise tariffs on Chinese-made toys to 35 percent, the maximum under rules of the Geneva-based WTO, from 20 percent has not helped local toymakers, the official said.

Rousseff has signaled she wants to work more closely with the US than did her predecessor, former Brazilian president Luiz Inacio Lula da Silva. On Dec. 2, she told Washington Post columnist Lally Weymouth she has “great admiration” for Obama, and in her inaugural speech to Congress said she hopes to “deepen” ties with the US.

Obama said during his State of the Union address last month that he will visit Brazil as part of his first-ever tour to South America. He’s also visiting Chile and El Salvador.

The US dollar has weakened 3.5 percent against the Chinese currency over the last two years. The real’s 39 percent gain against the US dollar in the same period is the second-best performance among 16 major currencies tracked by Bloomberg after the Australian dollar.